The industry faces “a perfect storm” of factors that are driving up premiums, according to Insurance Council of Australia CEO Andrew Hall, who has called for collaboration to ease pressure on customers. 

Speaking to SBS’ Insight show yesterday, Mr Hall pointed to extreme weather, building inflation, soaring reinsurance premiums and state insurance taxes as key influences.  

And he rejected allegations the industry is unfairly raising prices while recording profits, saying last year was an outlier after a run of losses by insurers.

Mr Hall said that while no part of Australia is uninsurable, pricing can be a barrier.  

“If you have to replace a home, like the insurers in Lismore have three times since 2017, or like they have done now in north Queensland ... you think back to what that annual premium would need to be to cover the likelihood that you will lose it again in the next five years, it becomes very expensive,” he said.  

“That’s why the sector has to partner with the government, banks and others to come up with a plan for homes most at risk.”  

Mr Hall said underinsurance is becoming more of a problem for customers, and the SBS program gave examples of people who were unable to cover their total rebuild costs.

“In 99% of the cases, insurers seek to restore and rebuild what is there,” Mr Hall said. “What we are seeing more and more, though, particularly in bushfire and flood areas, is when you go to do the rebuild, because of the increased compliance that exists ... the sum insured often is a lot lower than what it costs to rebuild a property.

“Underinsurance is an increasing problem in this country ... we need to talk to people and ask them, ‘If the worst happens in this current day, what would it cost to rebuild your property?’ ”  

Addressing policyholders who told the show of issues with cash settlements and delays, Mr Hall said the industry is “not proud when we hear these sorts of stories”.

“It is how we grapple with these large-scale events that is turning into the main challenge we face at the moment,” he added.  

Mr Hall also responded to criticism from political leaders, arguing the key issue is risk, not industry price gouging.  

“We need to do something about the risk rather than ignoring it. Putting more homes on floodplains, ignoring improvements in building standards, and building back things – in particular in a flood zone – and hoping it all won’t happen again is not going to be the solution for our insurance sector.”  

Climate Council economic councillor Nicki Hutley told the show there is a need to consider whether people in high-risk zones can stay in their homes long term.

“Ultimately, there will come decisions in particular places where it is just not prudent to be rebuilding at all, and this is a terrible thing for communities to have to come to terms with,” she said. “We need to mitigate from climate pollution itself, but we’re already baked into 1.5 degrees [of warming] ... we need to think about what we can do to adapt, and if that fails, retreat.”  

University of Queensland business professor Paula Jarzabkowski said there is a “need to change the whole dialogue of how insurance works”.  

“We need to make new decisions about how we want insurance to work, because the market doesn’t work in the situation we find ourselves in with the climate and the types of housing we now have,” she said. “It’s not to be critical of the insurers; that’s a market economy, and we live in one, but we are beyond being insurable in a market economy.”